Controlled fabrication of semiconductor nanostructures is an essential step in engineering of high performance photonic and optoelectronic devices. Diamond in particular has recently attracted considerable attention as a promising platform for quantum technologies, photonics and high resolution sensing applications. Here we demonstrate the fabrication of optically active, functional diamond structures using gas-mediated electron beam induced etching (EBIE). The technique achieves dry chemical etching at room temperature through the dissociation of surface-adsorbed H2O molecules by energetic electrons in a water vapor environment. Parallel processing is possible by electron flood exposure and the use of an etch mask, while high resolution, mask-free, iterative editing is demonstrated by direct write etching of inclined facets of diamond microparticles. The realized structures demonstrate the potential of EBIE for the fabrication of optically active structures in diamond.